London Daily

Focus on the big picture.
Friday, Jul 31, 2026

Bank of England policymaker says rates could rise again in May

Bank of England policymaker says rates could rise again in May

Catherine Mann argues that soaring energy and food prices will persist even if consumer demand weakens
A senior Bank of England policymaker has said Britain’s central bank could raise rates again next month to combat the risk of high inflation persisting into 2023.

Catherine Mann, a former Citigroup economist who joined the BoE’s nine-strong monetary policy committee (MPC) last year, said on Thursday that soaring prices of energy and food will persist next year, even if consumer demand weakens.

Some economists have forecast that the UK economy will shrink in the second quarter and possibly fall into recession following a collapse in consumer and business confidence in the wake of Russia’s invasion of Ukraine that is likely to worsen shortages of goods and push inflation to fresh highs.

However, Mann said it was important for the central bank to calm inflation expectations, which were likely to drive demands for higher wages, pushing inflation even higher.

“The domestic inflation ratchet … has been my central concern,” she said in a speech.

In February when the MPC voted for a 0.25-point increase in the base rate she voted with a minority for a sharper 0.5-point rise. Last month she voted with almost all other members for a 0.25-point rise, taking the base rate to 0.75%.

She said: “Monetary policy needs to keep inflation expectations anchored; by doing so now, less tightening will be required later, when demand may still be weak.”

The BoE will meet on 5 May to decide on the path of interest rates at a time when most households have begun to absorb a rise in national insurance contributions and a freeze on income tax thresholds that will push hundreds of thousands of taxpayers into higher tax brackets.

Inflation hit a 30-year high of 7% in March, and the BoE last month warned that the bigger-than-expected pickup in prices would squeeze growth later this year.

However, Mann said it was not obvious to her that this fall in consumer demand would come soon enough to prompt businesses to rein in forthcoming price rises.

“Tracking these price expectations and forecast revisions is of paramount importance since inflation ultimately is due to firms systematically able to raise their prices,” she said.

Moreover, staged energy price increases designed to smooth the recent shock increase in wholesale costs would extend the period of high inflation. “The underlying inflation ratchet associated with lagged CPI [consumer price index] in firms’ pricing expectations will imply more persistence in keeping inflationary pressures above target,” she said.

Financial markets expect Mann and the rest of the MPC to increase the base rate to 2.25% by the end of the year. However, many economists expect the biggest collapse in real disposable household incomes since records began in 1948 to force a U-turn.

Samuel Tombs, chief UK economist at the consultancy Pantheon Macroeconomics, said: “We doubt the MPC will be so cavalier as to hike bank rate to 2.25%.” He said a 0.25-point rise in May and another in August would be the most UK borrowers could expect as the economic situation worsened.

Danny Blanchflower, a former MPC member and professor of economics at the US Ivy League university Dartmouth College, said the BoE would be blamed for depressing household incomes at a time of rising poverty.

Mann’s concern that inflation would persist, driven by an explosion in wage demands, was based on “no evidence”, he added. “There is nothing in the survey evidence to show that households or financial markets believe inflation is going to last and no evidence that workers have the clout to increase wages by more than inflation.

“All the evidence points to there being a recession around the corner driven by higher taxes, rising energy and food costs and an evidence-free increase in interest rates.”
Newsletter

Related Articles

0:00
0:00
Close
Early-Release Scheme Faces Fresh Scrutiny as Reoffending and Prison Recalls Rise
Police Phone Checks Followed Report on Murder of MI5 Agent Inside Sinn Féin
Drought Status Extended Across All of Wales as Heat and Dry Weather Deepen Environmental Strain
Record-Low Danube Exposes Probable Mammoth Remains in Bulgaria
US Says It Has Carried Out Heavy Strikes on Iran After Attempted Attacks on Its Forces
The chief executive of the popular gaming company laid off many employees and his pay rose to 38 million dollars
UK Employment Holds Steady as Wage Growth Remains Moderate
England to Introduce Artificial Intelligence into Secondary School Curriculum
Wales Launches £1.2 Billion Industrial Regeneration Programme
High Court Upholds UK Digital Surveillance Framework
Northern Ireland Reaches Budget Agreement on Infrastructure and Public Sector Pay
Home Office Expands Digital Border Checks Nationwide
UK Approves Major North Sea Wind and Carbon Capture Project
The World's Most Terrifying Smartphone: Recording, Documenting, and Reporting to the Regime
Scotland Approves Major Renewable Energy Expansion
UK and United States Sign AI and Semiconductor Cooperation Pact
UK Treasury Tightens Fiscal Controls After Gilt Market Volatility
Bank of England Holds Interest Rates at 4.5%
UK Unveils £10 Billion NHS Funding Overhaul and Workforce Reform
The AI User Nightmare: Private Claude Conversations Leaked to the Internet
UK: Former Football Association Leaders Call for World Cup Boycott Over FIFA Privatization Plan
Forbidden Love: China severs millions from their virtual partners
Over 24 Hours in the Air: Qantas Airbus Completes Record-Breaking Test Flight
Prince Harry Faces Significant Legal Costs After Insurance Shortfall
FirstGroup Sells Rail Software Business to Tracsis for £48 Million
Victoria and Albert Museum Staff Vote for Strike Action
Norwegian Teenager Convicted Over Contract Killing Plot in Britain
Royal Mail Raises Bulk Mailing Prices by 30%
Immigration Remains Britain's Top Public Concern, Ipsos Survey Finds
Prime Minister Says Social Care Reform Must Precede Assisted Dying Legislation
Ofgem Proposes Steep Grid Connection Charges for New Data Centers
Major Cyberattack Compromises UK Education and Police Data
Government Reviews Jurisdiction Over Crimes Involving US Military Personnel
England Declares Widespread Drought After Record Dry July
UK Commits £8.4 Billion to Dreadnought Nuclear Submarine Program
Zuckerberg Opposes US Ban on Chinese AI Models and Warns of Regulatory Capture
Massive Wildfires Ravage Southern Europe: Fatalities in Greece and Evacuations Across France, Spain, and Turkey
NHS Leaders Warn Royal Mail Tariff Increases Will Raise Administrative Costs
Immigration Remains the Public's Top Concern in Britain, Ipsos Poll Finds
Britain Approves 16 New Grid Storage Projects to Strengthen Electricity Network
London-Listed Merger Activity Climbs Even as IPO Market Remains Weak
Institute of Directors Warns High Energy Costs and Taxes Continue to Weigh on UK Businesses
North Sea Industry Calls for Faster Approval of £10 Billion Rosebank and Jackdaw Projects
UK Inflation Eases to 2.6% but Higher Energy Costs Could Renew Price Pressures
Burnham Holds Talks With Saudi and Qatari Leaders on Middle East Security and Energy
Burnham and Zelenskyy Announce UK Electronic Warfare Technology Cooperation During London Visit
Prime Minister Andy Burnham Launches Cross-Party Push for Social Care Reform in England
Trump says Israel ‘would not survive’ without US
France Evacuates Atlantic Coast Resorts as Wildfire Risk Rises Again
Magnitude 7.1 Earthquake Strikes Kumamoto as Rescuers Search Collapsed Buildings
×